In 2019, the U.S. had 1.97 million acres of pastureland certified in USDA’s National Organic Program and 41,780 organically certified beef cows. The price of organic beef averaged $9.26 per pound in 2019, which represented a premium of $3.66 per pound, or 67% over conventional, according to USDA Agricultural Marketing Service’s Weekly Retail Organic Price Comparison reports.
Producers get premiums, too. But amounts are hard to pin down. We are unaware of any USDA report, or other source, for organic cattle prices or price premiums. One reason is organic beef production is by and large not a spot market business, it’s a program. Producers don’t treat it as an option. They develop long-term supply relationships predominantly using forward contracts to help ensure a 12-month supply meets a 12-month demand.
Premiums are the result of consumer demand as well as additional costs to produce organic beef. Consequently, to determine whether to target a product to the organic market, or any market, producers need to understand both the added cost to produce for the specific market and the price elasticity of demand for the product.
Organic a marketing tool
USDA’s National Ag Statistics Service recently released the 2019 Organic Survey. This was the sixth comprehensive organic survey USDA has conducted. The previous one was in 2016.
The National Organic Program states that all farms, ranches and handling operations displaying the “USDA Organic” seal must be certified organic by the state or by a private agency accredited by USDA, to ensure standards are followed.
Farms that follow the National Organic standards and have less than $5,000 in annual sales can be exempt from certification. The exempt farms may use the term “organic,” but may not use the “USDA Organic” seal. The 2019 Organic Survey published data from producers that were certified organic and those transitioning to organic certification.
Organic is not just a label. It’s a marketing tool. Producers must adhere to strictly regulated processes and be vetted by USDA-accredited certifiers to receive the organic designation. Animals raised on an organic operation must meet animal health and welfare standards, not be fed antibiotics or growth hormones, be fed 100% organic feed and have access to the outdoors.
Organic gains traction in Iowa
Results of the 2019 Organic Survey released Oct. 22 show Iowa had:
• 26 organic-certified beef cow farms
• 107 organic milk (dairy) cow farms
• 143 organic other cattle farms
Other cattle include heifers that have not calved, steers, calves and bulls. From 2016 to 2019, Iowa added nine organic beef cow farms, 31 organic dairy cow farms and 48 organic other cattle farms.
Iowa is tied for fourth with Pennsylvania nationally in number of organic beef cow farms behind only New York, California and Vermont. Iowa ranks eighth in both organic dairy cow operations and organic other cattle operations. Even so, Iowa only has about 4% of U.S. organic cattle operations. Iowa ranks lower in inventory numbers and has about 2% of the national organic cattle inventories.
In 2019, Iowa had 133,691 acres of organic-certified agriculture land. Organic pastureland acres rose by 49%, or 6,616 acres from 2016 to 20,167 acres in 2019. Organic cropland totaled 113,524 acres in 2019, up 27% or 23,939 acres from 2016. Organic acreage is still less than 1% of total Iowa farmland.
Iowa did have 369 acres transitioning to certified organic pastureland and 12,790 acres transitioning to certified organic cropland in 2019. Land must have had no prohibited substances applied to it for at least three years before the harvest of an organic crop.
The Iowa organic beef cow inventory at 1,117 head decreased by 25% from 2016 to 2019 but remained near 2011 and 2014 levels. For perspective, Iowa’s total beef cow inventory was over 905,000 head in 2019. Iowa’s 5,967 organic milk cow inventory rose 53% from 2016 to 2019. The organic other cattle inventory climbed 29% to 6,755 head.
Eggs take leading role
Iowa organic farms sold $144.596 million in organic commodities in 2019, up 10% from 2016. Organic sales from farms in Iowa are distributed 48% from crops, including nursery and greenhouse, 13% from livestock and poultry, and 39% from livestock and poultry products.
Iowa’s largest organic animal ag commodity is chicken eggs. With over $37.1 million in sales in 2019, eggs represent 26% of all organic sales in Iowa. Milk from cows is second for livestock with over $19.1 million in sales, or 13%. Other cattle sales, which would presumably be mostly fed cattle, accounted for over $3.3 million in sales, or 2.3%. These values were roughly the same for hog and pig sales.
In 2019, the average value of sales per Iowa certified organic farm was $186,095. Average sales values per farm certainly vary widely within farm types and across farm types. Average farm value of sales was highest for chicken eggs at $378,630 per farm. Swine farms and dairy cow farms were similar at $198,136 and $181,935, respectively, per farm. Other cattle farms averaged $30,154, while beef cow farms averaged $7,521.
Organic offers diversification
In Iowa, 45% of all farms with organic sales are 100% organic, and the other 55% are mixed operations. The data do not shed light on what percentage of total organic sales, and sales by commodity, are from 100% organic operations. Nonetheless, the organic market appears to be an important opportunity for diversification for many conventional Iowa farms.
Of the Iowa producers surveyed, 45% said a major challenge they face as an organic farmer is regulatory in nature. More than one-third also expressed issues with pricing or production problems. Specific to organic beef, research suggests costs of production are higher than commodity beef because of lower productivity, increased processing and marketing costs, and additional risks.
Some argue that drought more heavily stresses the organic segment of the beef industry than the conventional segment. Survey data gathered in Iowa in 2019 would not have detected that challenge. The weekly Drought Monitor in fall showed 40% of Iowa in drought and an additional 24% abnormally dry. This time last year, no drought or abnormally dry conditions were reported in Iowa.
Organic beef in the marketplace for 2020
USDA Ag Marketing Service’s Weekly Retail Organic Price Comparison report provides advertised retail prices at major supermarkets for items identified as “organic” and items identified as “conventional” for all regions. Ground beef is the most advertised product, specifically 80% to 89% lean. After ground beef, boneless New York strip steak is the most advertised.
Organic premiums differ greatly by product. In 2020, the premium for organic ground beef, 80% to 89% lean, ranged from $1 to $5.84 per pound, with an average of $3.09 per pound. Organic boneless New York strip steak premiums ranged from $2.12 to $14.40 per pound, with an average of $6.99.
These data also indicate retail prices for organic products can vary more widely than prices for conventional products. For example, prices for conventional 80% to 89% lean ground beef ranged from $2.85 to $4.96 per pound so far this year. Prices for organic label product ranged from $3.99 to $8.99 per pound.
At least in the case of a staple like conventional ground beef, it appears retailers may ration available supplies rather than using prices to ration demand. This is less so the case with organic-labeled ground beef.
Schulz is the ISU Extension livestock economist. Email email@example.com.